Automatic stays in bankruptcy court stop all legal action against debtors for their pending debts. However, when a divorce case and bankruptcy case are pending at the same time, the issues can become more complicated. The complications especially arise when the bankruptcy court has to determine which property is dischargeable and which is non-dischargeable for the debtor to fulfill his/her domestic obligation during and after divorce.
Traditionally, bankruptcy stay orders imposed a restriction on collecting alimony, child support and other domestic liabilities from the property of the estate. However, with the initiation of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCA) some exceptions have been included within the law. If the property is non-estate then those above mentioned obligations have to be fulfilled by the debtors from that property.
Under United States Code § 362(b) (2), the exceptions of Stay order on divorce related collection are enunciated and expanded by BAPCA. According to this code, the commencement and continuation of a divorce case is permitted. The dirorce judge can establish paternity, can modify domestic support obligation and can even dissolve a marriage. However, division of property can be done only if it is not an estate property. If any non-filing spouse tries to get an equitable division of property, such an attempt may also be dismissed by the automatic stay order. If the non-debtor party takes action in the state court to effectuate one of the above exceptions, the debtor can take recourse in the provision contained in §105. With this provision the bankruptcy judge can mobilize the stay order and cease the continuation of state court action.
If the ex-spouse raises claim of the past dues of alimony, the automatic stay order may nullify that claim. The state court cannot collect those alimony arrearages without obtaining express permission of the bankruptcy court.
Now let me point out the implications of chapter 7 and chapter 13 bankruptcies.
The money one earns after filing chapter 7 bankruptcy will be deemed to be property that qualifies as collectible 'post petition earnings'. You will be obligated by the rule of law to fulfill all your monetary obligation by using this money.
But the money you earn after filing a chapter 13 petition will be included in your bankruptcy estate. Therefore, this will not be sanctioned for the payment of arrearages of domestic support while the stay order. Only after obtaining legal order from Bankruptcy court one can get monetary support from his spouse.
By Suzanne Collins, guest blogger
Note, The Wright Law Offices, PC does not handle bankruptcy cases and any reader of this article should discuss bankruptcy laws with a qualified bankruptcy attorney.